A Comment -- General Comments From an Expert (A Commentary)

Markets. Not doing anything different this year. US had a 4.5% rally over the last couple of weeks. Would not be surprised at a pullback as they are just kicking the can down the road on the fiscal cliff. The Canadian Market (7.2%) really lagged the US (16%) last year. China appears to be stabilizing and improving and the US is not getting any worse. Expects gains this year in the 8%-10% range. Equities still look attractive to her.

Markets. For the last 18 months, we have gone through a push-pull relationship between some bigger macro risks that people have had concerns about, which has caused several bouts of weakness in the market. Counter balanced against this there have been some very aggressive, unconventional monetary policies that central bankers have been using to try and prop asset prices and bring some confidence to markets. Some of the policy moves have done a pretty good job of taking some of the fear out. The longer that can go on, slowly the healing will take place. You have to pick your spots on the risk curve as to how far out you want to go.

Dividends. Feels that the most obvious long-term theme in this market is dividend growth. There will be short periods of time when that theme may be underperforming the higher beta sectors, but with a lot less risk. This should be the core of most portfolios and then you pick your spots in some of the core leadership themes that might be away from the yield theme.

Natural gas. One of the secular themes is that we have low natural gas pricing, and likely to for some time because of all the gas that is being found. While that is tough on producers, and maybe on service companies, it’s a win for certain manufacturing companies that have big input costs that are centered around the cost of energy. (See Top Picks.)

Emerging markets. Shanghai has started to perform a lot better. Hong Kong had a good lift through the fall. Countries like Thailand and Indonesia had good moves. Seeing some strength in emerging markets. (See Top Picks.)

Markets. Runs seasonal rotational ETF. Today is the end of the Santa Clause rally. It was greater than average. Beyond this period you get to this stagnant period and investors are a bit cautious. There is a lot of good news baked into the market including the fiscal package. We could see a lull in the markets. The TSX is approaching the upper end of a trading range. It will likely respect, hold and then consolidate these levels. From late Feb. until May is usually pretty solid. 3 of the most profitable sectors in the first quarter are three of the top sectors in the TSX.

Silver. Entering the period of strength of seasonal strength. It is holding near a support level and should rebound over the short term. He prefers copper. In general you get metals tied to industrials doing better. Silver, Copper and Platinum do well through until May. Technicals look better for Copper right now.

Markets. He looks at the very long-term picture of the S&P 500 for example. There has been a lid over the past 12 years of around 1,550. Thinks it will reach this again but that is about the extent of it. And probably a little bit of weakness thereafter. At typical Bull market is usually around 4 years in length and we are approaching that period. Euro Stocks 50 chart shows a little bit of a breakout, which is very, very bullish suggesting that it will probably get back into the old high levels of the low 40s. The Shanghai chart also shows a breakout, similar to a lot of the emerging markets, which look very, very strong. This also applies to the Japanese stocks.

Oil. Forming a symmetrical triangle but needs to break that triangle, which would be at about $94 and he feels that will happen at around the seasonal time, which is February. Don’t buy until there is a breakout though.

What technicals do you use for ETF funds? Does your approach differ for individual stocks? He trades ETFs on a purely technical basis so will use some seasonal analysis to look at various sectors that might be coming into favour and then will look at the charts to determine if he wants to trade or not. On individual stocks, he tends to do a lot of quantitative screening for some individual (fundamental) factors and then charts from there to find the best stocks of some fundamentally screened stocks.

Dividend stocks. There is talk that dividends stocks are overvalued and there are sectors where valuations are a bit stretched but we have never seen an interesting environment like there is today. For someone looking for a combination of income and growth in their investments, there is really nowhere else to turn. The demographics of people getting older also supports dividend stocks.

Markets. Doesn’t see any sign that we are going to get out of the inability of the US to manage itself. These problems are going to continue. We are going to have to now walk through nervously to March where there is another serial event. Looking for a fair amount of mergers and acquisitions which will be our Saviour as long as you manage to hit some of those things. Acquisitions are extremely good because prices on the whole are depressed so companies are ready to buy them low.

Canadian banks. What should retail investors pay most attention to with regards to Canadian banks’ annual reports in preparation for attending annual meetings? You should be looking at earnings and consistency throughout the operations. You should be holding a selection of Canadian banks in your portfolio. You should not be without them if you are conservative and a long-term investor.

Oil. Sees a fair amount of M&A activity in this sector as dividend paying enterprises emerge. They build a healthy level of cash flow and have to continue some degree of growth. Their intent is to get their stock values up, which reduces their cost to capital. If that happens, that means the smaller enterprises will look relatively attractive and he feels that is where we are heading in the next 12-18 months.

Heavy oil. Has been a combination of very bad things happen to heavy oil producers, one of which is the transportation bottlenecks in the US which has been followed up by a big new influx of light oil production in the US. This meant that Canadian crude prices got hammered. Also, the difference between heavy and light oil prices got hammered. Heavy oil differentials right now are at all time record highs. There is reason to be optimistic. The pipeline expansions underway that will show up in 2013 will add basically a million barrels of new transportation capacity to the crude system in the US. Have been refinery turnarounds that have slowed the need for product and these are now complete. Feels that the 2^nd half of 2013 sets itself up for a big narrowing of the heavy/light differential.